PLSA chair, Richard Butcher, has warned that aiming for pension schemes to use ‘best endeavours’ in reducing material climate risks within the forthcoming green taxonomy framework in the UK could lead trustees down a ‘dead end’.

Speaking at the PLSA ESG Conference, Butcher noted that, unless the route for trustees is defined, they could take a course of action that will not be consistent with the eventually agreed taxonomy.

“The taxonomy is really important so we welcome that as an initiative,” he stated. “I hope that they will crack on with it; we need to get this resolved quite quickly.

“At the moment, there is this aim that pension schemes will use best endeavours, but my concern about best endeavours is that unless we defined the route we want trustees to take, they will end up going down a dead end.”

Best endeavours places an obligation on the scheme to take all steps that a prudent and determined person acting in their own interests and desiring the result would take, even if it means subordinating its own interests.

During the session, Butcher also called for a common definition of the objective of the green taxonomy so all parties can “pull in the same direction”.

“That output should align with EU output,” he continued.

“We, as pension funds, can only do so much, and we can only do so much as a UK economy. We have to try and align with others so we are pulling in the same direction.”

Chancellor, Rishi Sunak, announced that the UK would be implementing a green taxonomy, a common framework for determining which activities can be defined as environmentally sustainable, in November last year.

The UK taxonomy will take the scientific metrics in the EU taxonomy as its basis and a UK Green Technical Advisory Group has been established to review these metrics to ensure they are right for the UK market.

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